Children's Broadcasting Corp. v. Walt Disney Co.

Full title: Children's Broadcasting Corporation, a Minnesota corporation, Plaintiff…

Court: United States District Court, D. Minnesota

Date published: Aug 12, 2002

Civil No. 3-96-907 ADM/AJB (D. Minn. Aug. 12, 2002)

Opinion

Civil No. 3-96-907 ADM/AJB

August 12, 2002

Thomas F. Cullen, Jr., Esq., Adrian Wager-Zito, Esq. and Kevin C. Maclay, Esq., Jones, Day, Reavis Pogue, Washington, D.C., and Richard G. Mark, Esq., Briggs Morgan, Minneapolis, MN, on behalf of Plaintiff.

Paul B. Klaas, Esq., and Steven J. Wells, Esq., Dorsey Whitney, Minneapolis, MN, on behalf of Defendants.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge

I. INTRODUCTION

On June 20, 2002, the undersigned United States District Judge heard post-trial motions by Defendants Walt Disney Company ("Disney") and ABC Radio Networks, Inc. ("ABC Radio") (collectively, "Defendants"), and Children's Broadcasting Corporation ("Children's"). Defendants presented their Motion for Judgment as a Matter of Law, or in the alternative, for New Trial [Doc. No. 569]. Children's argued its Motion for Entry of Judgment, which it claims should include prejudgment interest and exemplary damages. For the reasons set forth below, Defendants' Motion is denied and judgment will be entered as specified herein.

II. BACKGROUND

This is a case of long duration. Children's brought this suit on September 26, 1996, alleging many claims. All but three claims were terminated by summary judgment. The three remaining claims, breach of contract for failure to use reasonable efforts to sell advertising and develop affiliates, breach of the contractual duty of confidentiality, and misappropriation of trade secrets, were tried to a jury in a three-week-long trial in September, 1998. The jury found that ABC Radio breached the contract with respect to advertising sales and confidentiality, and awarded $20 million to Children's for this breach.¹ The jury also found that ABC Radio and Disney had misappropriated Children's trade secret, a list of Children's advertisers and their rates, and awarded Children's $10 million from ABC Radio and $10 million from Disney on this claim.

1 The jury rejected Children's claim that ABC Radio breached the contract provision for affiliate development.

ABC Radio and Disney moved for judgment as a matter of law or, in the alternative, a new trial. Judge Donald D. Alsop, the presiding judge in the first trial, granted judgment as a matter of law to ABC Radio and Disney, concluding that although the evidence supported the jury's finding that ABC Radio breached the contract and that ABC Radio and Disney misappropriated the advertiser list, Children's had failed to present sufficient evidence of causation or damages. The court also determined that the testimony of Stephen Willis, one of Children's experts, should have been excluded and the admission of his testimony tainted the jury.²

2 Willis testified that Children's damages were $177 million.

The Eighth Circuit reversed the judgment as a matter of law and remanded for a new trial limited to damages. Children's Broadcasting Corp. v. The Walt Disney Co., 245 F.3d 1008, 1022 (8th Cir. 2000). The evidence was found sufficient to support the jury's finding that the breach of contract and the misappropriation of the advertiser list caused harm to Children's and that ABC Radio and Disney were not entitled to judgment as a matter of law on causation. Id. at 1016. The Eighth Circuit also determined there was evidence from which the jury could assess the amount of damages sustained by Children's, and therefore held that ABC Radio and Disney were not entitled to judgment as a matter of law on damages. Id. at 1017. Nevertheless, the Eighth Circuit held that the district court did not abuse its discretion by granting a new trial based upon the taint caused by Willis' testimony, which gave the jury an inflated, unrealistic measure of damages. Id. at 1018-19. The case was remanded for a new trial.

Beginning April 29, 2002, this Court retried the case limited to the issue of damages. The trial lasted eight days. The jury deliberated for a day and a half and awarded Children's $1.5 million for breach of contract by failing to use reasonable efforts to sell advertising for Radio AAHS, and $8.0 million for breach of the contractual duty to maintain the confidentiality of PX 217 and misappropriation of PX 217.³ For purposes of their Motion for Judgment as a Matter of Law, Defendants challenge only the $8.0 million award for breach of confidentiality and misappropriation of PX 217.

3 Plaintiff's Exhibit # 217 ("PX 217") is Children's trade secret, a list of Children's advertisers and their rates.

III. DISCUSSION A. Motion for Judgment as a Matter of Law

At the close of Children's case-in-chief, Defendants moved for judgment as a matter of law. See Fed.R.Civ.P. 50(a)(2) ("Motions for judgment as a matter of law may be made at any time before submission of the case to the jury."). The motion was denied. When a "court does not grant a motion for judgment as a matter of law made at the close of all the evidence, the court is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion." Fed.R.Civ.P. 50(b); see also Peerless Corp. v. United States, 185 F.3d 922, 926 (8th Cir. 1999). Defendants now renew their Motion for Judgment as a Matter of Law. See Fed.R.Civ.P. 50(b) ("[A] movant may renew its request for judgment as a matter of law [and] may alternatively request a new trial.").

Judgment as a matter of law is appropriate only when there is insufficient evidence to permit a reasonable jury to find in favor of the nonmoving party. Gardner v. Buerger, 82 F.3d 248, 251 (8th Cir. 1996). The facts must be viewed in the light most favorable to the verdict, assuming that the jury resolved all evidentiary conflicts in favor of the prevailing party. Van Steenburgh v. Rival Co., 171 F.3d 1155, 1158 (8th Cir. 1999). The Court will "not weigh, evaluate, or consider the credibility of the evidence." Triton Corp. v. Hardrives, Inc., 85 F.3d 343, 345 (8th Cir. 1996). A jury's verdict should not be overturned unless no reasonable juror could have found in favor of the prevailing party. Van Steenburgh v. Rival Co., 171 F.3d 1155, 1158 (8th Cir. 1999); Ryther v. KARE 11, 108 F.3d 832, 836 (8th Cir. 1997).

The pivotal question is whether the jury's verdict, specifically the $8.0 million award for breach of confidentiality and misappropriation of PX 217, should be overturned because no reasonable juror could have reached it. "Under Minnesota law, damages for breach of contract must be proved to a reasonable certainty, and a party cannot recover speculative, remote, or conjectural damages." Children's, 245 F.3d at 1016 (citing Leoni v. Bemis Co., 255 N.W.2d 824, 826 (Minn. 1977)). "Once the fact of loss has been shown, the difficulty of proving its amount will not preclude recovery so long as there is proof of a reasonable basis upon which to approximate the amount." Id. "The jury's award does not have to match any particular figure in the evidence as long as the award `is within the mathematical limitations established by the various witnesses and is otherwise reasonably supported by the evidence as a whole.'" Id. (quoting Carrol v. Pratt, 76 N.W.2d 693, 697 (Minn. 1956)). Evidence was presented to the jury which would permit reasonable jurors to award Children's damages in the amount of $8.0 million for breach of the contractual duty to maintain the confidentiality of, and misappropriation of, PX 217. There was evidence indicating that PX 217 possessed value. ABC Radio specifically requested the information in PX 217 from Children's. See Trial Tr. (5/02/02) Vol. IV at 71-72; Pl. Ex. 200 (Senior Management Review); Pl. Ex. 310 (planning document for Radio Disney). Jim Gilbertson testified that PX 217 would be "useful" to a competitor. Trial Tr. (5/02/02) Vol. IV at 72-73. Rick Smith testified that PX 217 was valuable. Trial Tr. (4/30/02) Vol. II at 158-60.

Children's presented evidence that ABC Radio and Disney were able "to accelerate their entry into the market by using information, particularly information about advertising and marketing, they obtained from Children's." Children's, 245 F.3d at 1016. The damages jury approximated the value of that acceleration gain to Defendants, as well as the value of the removal of competitive uncertainty and risk. Evidence indicated that ABC Radio viewed its relationship with Children's as one of "competitive control . . . we can take control of how we enter or CBC exits the market." Pl. Ex. 138. ABC Radio planned that "Radio Disney Network Spots Will Be Priced Agressively Versus AAHS." Pl. Ex. 532. During the planning of Radio Disney, PX 217 appears in a draft "deck" dated April 24, 1996. Pl. Ex. 310. Jurors are entitled to draw reasonable inferences from the facts established during the testimony.

In June, 1996, Defendants estimated the value of the Radio Disney opportunity at approximately $270 million. See Pl. Ex. 362 at 1007250; Pl. Ex. 456 at 1012987. Radio Disney's projected advertising revenue for 1998 was approximately $8 million. Pl. Ex. 362. Evidence showed that Disney views Radio Disney as "tremendously successful" and a success "by any measure." Trial Tr. (5/06/02) Vol. VI at 229; Pl. Ex. 941. There were reasonable bases upon which jurors could approximate the gain to Defendants and award $8.0 million in damages to Children's.

Dr. Jonathan Putnam also presented evidence of damages measured at a range of time intervals. The jury was entitled to use Dr. Putnam's expert testimony as a guide in their deliberations, or to disregard his opinions. Jury Instruction Number 8 provided:

You should consider each expert opinion received in evidence in this case, and give it such weight as you may think it deserves. If you should decide that the opinion of an expert witness is not based upon sufficient education and experience, or if you should conclude that the reasons given in support of the opinion are not sound, or if you feel that it is outweighed by other evidence, you may disregard the opinion entirely.

Dr. Putnam was permitted to testify as an expert after satisfying the court that he possessed significant credentials for valuing a trade secret and employed an accepted academic methodology in arriving at his conclusions. Dr. Putnam's testimony was relevant and his methodology was reliable. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141-42 (1999). Defendants' objections to Dr. Putnam's testimony are better directed to the issue of the weight to be given to the testimony rather than its admissibility. Trial Tr. (5/03/02) Vol. V at 38. Moreover, Defendants received a full opportunity to cross-examine Dr. Putnam and could have presented rebuttal expert testimony.

Just as the Eighth Circuit found that there was evidence at the first trial from which the jury could approximate the amount of damages sustained by Children's,⁴ this Court finds there was sufficient evidence in the retrial on damages from which the jury could approximate the amount of damages endured by Children's at $8.0 million. "The jury's award does not have to match any particular figure in the evidence." Children's, 245 F.3d at 1017. ABC Radio and Disney are not entitled to judgment as a matter of law.

4 Children's, 245 F.3d at 1017 (holding that Defendants were not entitled to judgment as a matter of law on damages).

B. Motion for a New Trial

Defendants also raise a Motion for a New Trial. See Fed.R.Civ.P. 50(b)(1)(B); Fed.R.Civ.P. 59(a). Motions for a new trial are committed to the discretion of the district court. See McDonough Power Equip. v. Greenwood, 464 U.S. 548, 556 (1984). A denial of a motion for a new trial based on the sufficiency of the evidence is "virtually unassailable on appeal" and is disturbed only upon a finding of a clear abuse of discretion. Czajka v. Black, 901 F.2d 1484, 1485 (8th Cir. 1990). A court may not grant a motion for a new trial unless the verdict is against the great weight of the evidence and a new trial is necessary to prevent a miscarriage of justice. See Denesha v. Farmers Ins. Exch., 161 F.3d 491, 497 (8th Cir. 1998); Iowa-Mo Enterprises, Inc. v. Avren, 639 F.2d 443, 452 (8th Cir. 1981) (stating that a "jury verdict will be reviewed only to determine whether the damages award constitutes `plain injustice,' is `monstrous,' or produced a `shocking' result"). A court should grant a new trial only if it finds that an error "misled the jury or had a probable effect on its verdict." E.I. Du Pont de Nemours v. Berkley Co., 620 F.2d 1247, 1257 (8th Cir. 1980). A court may not usurp the role of the jury by granting a new trial simply because it believes other inferences and conclusions are more reasonable. White v. Pence, 961 F.2d 776, 780-81 (8th Cir. 1992).

Defendants' Motion for a New Trial is denied. This Court has reviewed the evidence and its evidentiary rulings and concludes that a new trial is not warranted. As discussed above, substantial evidence supports the jury's award.

Furthermore, Defendants' proposed jury instructions were properly denied. Defendants requested several instructions addressing the absence of a special relationship, the lack of fiduciary duties, the absence of fraud, and the purpose of the contract. These topics were irrelevant in the retrial limited to damages. The Court attempted to narrowly define the questions for the second jury, and cautioned in Jury Instruction Number 14:

The November 17, 1995, contract between Children's and ABC did not restrict ABC and Disney's right to compete against Children's. The establishment of Radio Disney cannot be considered wrongful conduct.

ABC did not breach any other provision of the contract with Children's other than the duty to use reasonable efforts to sell advertising and the duty of confidentiality with respect to Plaintiff's Exhibit # 217. Any other claims for breach of contract or other wrongdoing were rejected by the first jury.

Defendants also argue that the second jury should have been instructed about the first jury's finding of "non-material" breach. The Eighth Circuit noted, "[t]he verdict form included the question of whether ABC Radio's breach was material because Children's owed $91,000 under the contract. If the jury found the breach to be material, Children's performance (and thus the payment) would be excused." 245 F.3d at 1014 n. 1. Whether the breach was "material" or "non-material" was irrelevant in the retrial on damages because materiality is only relevant to the question of CBC's right to suspend performance. In order for a breach to justify the injured party's suspension of performance, the breach must be significant enough to amount to the nonoccurrence of a constructive condition of exchange; such a breach is termed "material." Farnsworth on Contracts § 8.16 (2d ed. 1998). An immaterial breach does not amount to the nonoccurrence of a constructive condition of exchange, so the injured party is not entitled to suspend performance, though it may claim damages for partial breach. Id. A breach is less likely to be characterized as material where the breach may be paid for in damages. Id. (citing Boone v. Eyre, 126 Eng. Rep. 160(a) (K.B. 1777) (holding that a party may have remedy in damages)). The question of CBC's right to suspend performance, and withhold payment of the $91,000, was not at issue in the retrial limited to damages.⁵ The first jury's finding on materiality shared the same fate as its damages findings of $20 million, $10 million, and $10 million. None of these findings from the first trial were disclosed to the retrial on damages jury.

5 Judge Alsop entered judgment after the first trial without addressing Defendants' counterclaim. Defendants did not appeal the disposition of the counterclaim.

C. Prejudgment Interest

Children's seeks prejudgment interest. In Minnesota, both statute and common law govern the award of prejudgment interest. See Minn. Stat. § 549.09; Potter v. Hartzell Propeller, Inc., 189 N.W.2d 499, 504 (Minn. 1971). Section 549.09 provides that the prevailing plaintiff is entitled to preverdict interest on pecuniary damages computed from the time of the commencement of the action, except as otherwise provided by contract or allowed by law. Minn. Stat. § 549.09, subd. 1(b). The statute is clear: the prevailing party "shall receive interest" on any award, with a few limited exceptions. Id.

Defendants argue that Children's award in this case falls within the exception for future damages. See Minn. Stat. § 549.09, subd. 1(b)(2) ("interest shall not be awarded on . . . awards for future damages"). However, there were no future damages awarded in this case. Jury Instruction Number 16 instructed that "damages for breach of the contract must be limited to those suffered on or before October 24, 1996." Children's presented evidence, such as the discounted cash flow model, to help the jurors calculate the net present value of its damages. The future damages exception to prejudgment interest does not apply here.

Defendants also contend that Children's failure to keep its settlement offer open for 30 days bars Children's from receiving prejudgment interest. Section 549.09 "does not require either party to make a settlement offer or respond to an offer made by the other party." Trapp v. Hancuh, 587 N.W.2d 61, 64 (Minn. 1998). Parties may make offers and, if a party makes an offer, the statute provides a time period for the other party to accept or reply with a counteroffer.⁶ The statute additionally provides a mechanism for the court to determine which of the parties' offers should be used in calculating prejudgment interest. Id. The statute does not require a settlement offer to be made and held open for 30 days as a prerequisite for receiving prejudgment interest.

6 The statute reads in pertinent part: "If either party serves a written offer of settlement, the other party may serve a written acceptance or a written counteroffer within 30 days." Minn. Stat. § 549.09, subd. 1(b) (emphasis added).

Defendants further argue that Children's should not receive prejudgment interest because the damages were not readily ascertainable. This argument is unsupported by the case law. The Eighth Circuit observed that § 549.09 allows prejudgment interest "irrespective of a defendant's ability to ascertain the amount of damages for which [it] might be held liable." Simeone v. First Bank Nat'l Ass'n, 73 F.3d 184, 191 (8th Cir. 1996) (quoting Lienhard v. State, 431 N.W.2d 861, 865 (Minn. 1988)). A mere difference of opinion as to the exact amount of damages is insufficient to excuse a defendant from compensating a plaintiff for loss of the use of its money. Id. (citing Solid Gold Realty, Inc. v. Mondry, 399 N.W.2d 681, 684 (Minn.App. 1987)); see also Myers v. Hearth Tech., Inc., 621 N.W.2d 787, 794 (Minn.App. 2001) ("preverdict interest is available irrespective of a defendant's ability to ascertain the amount of damages").

Children's is entitled to prejudgment interest under Minnesota statute. The prejudgment interest is computed as simple interest per annum, based on a bank-discounted secondary market yield of one-year U.S. treasury bills. Minn. Stat. § 549.09, subd. 1(c). The applicable annual rates were five percent in 1996, 1997, 1998; four percent in 1999; five percent in 2000; six percent in 2001, and two percent in 2002. See Minn. Stat. § 549.09, Statutory Notes (2002). The total verdict award was $9.5 million. Children's is entitled to interest for the period from September 26, 1996, to May 10, 2002. The total amount of prejudgment interest to which Children's is entitled is $2,567,082.19.⁷

7 Table calculating the interest:
Year Rate

1996 $ 124,931.51 0.05 97 days 1997 $ 475,000.00 0.05 1998 $ 475,000.00 0.05 1999 $ 380,000.00 0.04 2000 $ 475,000.00 0.05 2001 $ 570,000.00 0.06 2002 $ 67,150.68 0.02 129 days _______________ $ 2,567,082.19

D. Exemplary Damages

Children's asks for exemplary damages based on Defendants' "willful and malicious" conduct. However, there was not a finding of "willful and malicious" conduct by the first jury. The remand from the Eighth Circuit was for a "new trial limited to damages." Children's, 245 F.3d at 1022. The issue of whether Defendants' conduct rose to the level of "willfulness and maliciousness" is a liability question and beyond the scope of the limited remand. Such a determination would necessarily concern the nature of Defendants' conduct and go beyond the evaluation of damages. This Court heard insufficient evidence to support a finding of "willful and malicious" conduct. Children's request for exemplary damages is denied.

IV. CONCLUSION

Based upon the foregoing, and all of the files, records and proceedings herein, IT IS HEREBY ORDERED that:

(1) Defendants' Motion for Judgment as a Matter of Law, or in the alternative, for New Trial [Doc. No. 569] is DENIED;

(2) Plaintiff's Motion to Enter Judgment is GRANTED and judgment is entered on the jury verdict award totaling $9.5 million;⁸

8 This sum is reached by adding the $1.5 million for breach of contract by failing to use reasonable efforts to sell advertising for Radio AAHS and the $8.0 million for breach of the contractual duty to maintain the confidentiality of PX 217 and misappropriation of PX 217.

(3) Plaintiff is awarded $2,567,082.19 in prejudgment interest; and

(4) Plaintiff's request for exemplary damages is DENIED.

LET JUDGMENT BE ENTERED ACCORDINGLY.